Is This a Major Red Flag for Facebook?

Facebook currently uses an algorithm to place the right posts in front of the right people. While the algorithm is constantly changing, a large update in September, aimed at cutting down on news feed spam, seems to have also cut down on the ability of brands to reach their audiences.

In an email partially posted to ReadWriteWeb, Cuban slammed the change, calling it a weakness in the company’s strategy and saying that he would start to move the Maverick’s social presence to other websites. Interestingly enough, he pointed at MySpace as an option.

“Actually, MySpace is going through a reformatting that looks pretty good. There is a greater than zero chance that it could gather quite a bit of momentum,” he said in the email.

Mr. Cuban sums up his attitude on the situation: “I get that they want to reduce the speed at which news scrolls off of people’s Facebook pages. The more stuff, the less you see; the less you see, the less you engage. All good points by Facebook. But it’s a reflection of overall design and strategy weakness. Again, why would a brand invest in getting likes they can’t reach without paying a premium?”

The strategy looks like a botched attempt at revenue generation that will end up driving brands away from Facebook. General Motors (NYSE:GM) infamously pulled a huge advertising campaign from Facebook right before its IPO, casting a shadow of doubt over the effectiveness of advertising through the social network that still lingers. Major companies that do still use Facebook as a platform include Ford (NYSE:F) and Coca-Cola (NYSE:KO). It will be interesting to see if their attitude toward Facebook shifts because of this development.

At the end of the day, Mr. Cuban claims that Facebook doesn’t understand its own initiative to drive revenue. The complexity of the system will “come back to haunt Facebook,” especially with alternatives like Twitter on the table.